Correlation Between Everdisplay Optronics and Zhongyin Babi

Can any of the company-specific risk be diversified away by investing in both Everdisplay Optronics and Zhongyin Babi at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Everdisplay Optronics and Zhongyin Babi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Everdisplay Optronics Shanghai and Zhongyin Babi Food, you can compare the effects of market volatilities on Everdisplay Optronics and Zhongyin Babi and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Everdisplay Optronics with a short position of Zhongyin Babi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everdisplay Optronics and Zhongyin Babi.

Diversification Opportunities for Everdisplay Optronics and Zhongyin Babi

0.41

Correlation Coefficient

Everdisplay Optronics  Zhongyin Babi

Very weak diversification

The 3 months correlation between Everdisplay and Zhongyin is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Everdisplay Optronics Shanghai and Zhongyin Babi Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongyin Babi Food and Everdisplay Optronics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Everdisplay Optronics Shanghai are associated (or correlated) with Zhongyin Babi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongyin Babi Food has no effect on the direction of Everdisplay Optronics i.e., Everdisplay Optronics and Zhongyin Babi go up and down completely randomly.

Pair Corralation between Everdisplay Optronics and Zhongyin Babi

Assuming the 90 days trading horizon Everdisplay Optronics Shanghai is expected to under-perform the Zhongyin Babi. But the stock apears to be less risky and, when comparing its historical volatility, Everdisplay Optronics Shanghai is 1.31 times less risky than Zhongyin Babi. The stock trades about -0.04 of its potential returns per unit of risk. The Zhongyin Babi Food is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,569  in Zhongyin Babi Food on October 23, 2024 and sell it today you would earn a total of  137.00  from holding Zhongyin Babi Food or generate 8.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Everdisplay Optronics Shanghai  vs.  Zhongyin Babi Food

Everdisplay Optronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everdisplay Optronics Shanghai has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Everdisplay Optronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhongyin Babi Food

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongyin Babi Food are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongyin Babi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Everdisplay Optronics and Zhongyin Babi

The main advantage of trading using opposite Everdisplay Optronics and Zhongyin Babi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Everdisplay Optronics position performs unexpectedly, Zhongyin Babi can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Zhongyin Babi will offset losses from the drop in Zhongyin Babi's long position.

The idea behind Everdisplay Optronics Shanghai and Zhongyin Babi Food pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.